The CIP must contain risk-based procedures for verifying the identity of the customer within a reasonable period of time after the account is opened. The verification procedures must use “the information obtained in accordance with [31 CFR 103.121] paragraph (b)(2)(i),” namely the identifying information obtained by the bank. A bank need not establish the accuracy of every element of identifying information obtained, but it must verify enough information to form a reasonable belief that it knows the true identity of the customer. The bank’s procedures must describe when it will use documents, non-documentary methods, or a combination of both.
Who is a customer?
The AML/CTF Rules set different identification and verification requirements for different types of customers:
- individuals (including sole traders)
- companies (both domestic and registered foreign companies)
- incorporated and unincorporated associations
- registered co-operatives
- government bodies.
For the purpose of KYC policy, a ‘Customer’ is defined as
- A person or entity that maintains an account and/or has a business relationship with the bank
- One on whose behalf the account is maintained
- Beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law and
- Any person or entity connected with a financial transaction which can be pose significant reputational or other risks to the bank, say, a wire transfer or issue or a high value demand draft as a single transaction.
When does a customer need to be identified?
A reporting entity must verify a customer’s identity before providing a ‘designated service’ to the customer. Designated services are listed in section 6 of the AML/CTF Act.
In special cases, an identification procedure may be carried out after providing a designated service. Currently the Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No. 1) (AML/CTF Rules) provide special circumstances for certain online gambling services.